Canadian Small Business Women

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6 mistakes entrepreneurs make when seeking out funding

Praveeni

Entrepreneurs often have many  “great” ideas and rely on funding in the form of a business loan or investors to bring their dreams to light.  Pitching your business and asking for funding can be an intimidating and grueling process. However if successful the payoffs can be huge. Unfortunately many entrepreneurs aren’t successful in securing the funding they require. Here’s a look at 6 mistakes entrepreneurs make when seeking out funding:

  1. Over-valuing their firm or product
    Ok you’ve got an idea- that’s great, but how much is it worth? If it’s your idea it’s probably priceless to you but how much is your business really worth? People tend to over-value their business in hopes of securing a greater investment but that very often fails. Take an objective stance when valuing your business – look at how much you’ve done in sales, your costs and how much revenue you’re really brining in. Remember sales do not denote firm value. Don’t forget to factor in your production, operational and carrying costs.
  1. Presentation & pitch is too long
    Your elevator pitch and investor presentation should be short and informative. Keep your presentation under 10 slides and make your slides concise with 3-5 points per slide. Your elevator pitch should be about a minute long at most. If you can’t summarize your business in under a minute you may need to spend more time understanding your business. No one wants to be stuck listening to a 20 slide presentation.
  1. No concept of market size
    Whenever you offer a product or service you must be aware of how large or small its market is. Whether it’s a nice or mass market item, every product/service has a market. It’s up to you as an entrepreneur to research your market and determine who your target audience is and how much of a market share you would like to capture. Remember 100% market share isn’t always a viable or profitable goal. Be realistic in your market share goals and understand the size of your market.
  1. No professional business plan

A well written, factually correct business plan can garner you the funding you               require. It’s important not to skimp on your business plan. Don’t rush it, take time     to understand the risks, opportunities and profitability of your idea. Make sure you     comprehend your product and what it will take to bring your idea to market.  Many     people overlook the financial aspect of a business plan. Projections can be                     intimidating so seek out professional help if you require it, never assume always ask.

  1. Inability to explain what problem their product solves
    Ok so you’ve got an idea – great! How can it help me? What problem will it solve? Many times entrepreneurs are unable to explain exactly how their product is useful to consumers. This can be off-putting to investors as they think – if a person can’t even explain their own product then how can they sell it? You must fully understand your product or service and how it benefits consumers. Be prepared to answer questions about your own product and your competitor’s offerings as well. The more informed you are the better.
  1. No flexibility
    When asking for funding you need to be flexible. Remember you’re asking someone else to put their trust and money in you and your business. You may not always get the offer you prefer and in some cases may have to counter offer as well. It’s good to be prepared with at least 3 different counter offers when pitching to investors. You should also be open to different kinds of offers. This doesn’t mean give away your whole company for free but listen to what they have to say and run the numbers before you decide to accept, counter or decline. Most importantly be realistic – have a realistic valuation and seek out the appropriate amount for the share you’re offering.

 

Praveeni Perera is the CEO and co-founder of Professional Edge Consulting a corporate training company based in Ottawa offering training and coaching services to clients around the world.  She can be reached via Website, Twitter, Facebook or her Blog.

The Importance of Research

Sheralyn

The importance of, and the reliance upon, good, old-fashioned research should never be underestimated.  Whether we grew up using the Dewey Decimal system and Encyclopedia Britannica or more recently, rely on “Dr. Google” and “Wikipedia” – the simple fact is, research can support your thesis, or give your website credibility and it fosters the viability of your business.  So whether you are creating a website, starting a new business, contributing to a magazine article or blog – make sure you do your research and always site your sources. It might sound kind of obvious but fewer and fewer people seem to be doing it these days.

In starting a new business venture research is critical. You are going to want to complete a market analysis, scout locations, survey your potential customer base and thoroughly investigate financing options.  Each of these steps requires research and further, requires you to produce written documentation that you can present to potential backers, even if that backer is your spouse or mother in law. Reliance upon cold, hard facts with supporting documentation is what’s needed when considering investing in business so the research step is important. Ensuring the use of credible sources while on your fact finding mission is also paramount.

When it comes to websites, often this is the first place your customer finds you. Websites with lots of “jazz, pizzazz and razzmatazz” will only take you so far if the product or service you are selling is represented inaccurately.  With websites, not only are you seeking accuracy in the description of your product or service, you also must ensure that whomever designs your site has also spent time researching SEO keywords for your industry, knows and understands the function of font and colour scheme to best attract the type of customer you seek and can provide you with information on where your website is likely to place in Google rankings. You better darn well hope they have also done their due diligence when it comes to logo design and other potentially proprietary information. I write website content for clients and a significant amount of my time should be spent on conducting research to ensure accuracy, avoid duplication and create content that both resonates and ranks.

If you are looking to drive traffic to your website and/or just have an interest in writing once again, whether blogging or submitting articles for publication, research to clarify content and guarantee accuracy is not just important but ethical too.  From a legal standpoint you want to be sure your claims about products are defensible and true and if you are writing about a person, quoting facts is the only feasible option. Writing an article or blog that compares two types of services, (perhaps comparing Naturopathic and Western medicine for example) requires extensive due diligence on the part of the author and research, verifying the accuracy of sources and interviewing key people in the field is what you MUST do. Too many irresponsible people with easy access to the Internet are presenting what amount to opinion pieces that have no solid foundation in fact.  Blogging for business is not the time to share your opinions.

It is incumbent upon us to be sure that whether we are offering information or searching for it, we take the time to verify its accuracy. If you are responsible for content, make sure it is well researched, accurate and sourced appropriately. If you are looking for information apply the same due diligence to your search.  Look for the source, is it credible? Apply the scientific principle – is it replicable? You probably want to place a higher degree of reliability upon a medical site hosted by the Mayo Clinic than one hosted by Facebook, curated by “Tom” and called “Free guide to pain free Home Dentistry!”   This might all seem like common sense but the unfortunate fact is common sense appears harder and harder to come by.  Our reliance upon the web to present factual and credible information and to discern fact from fiction has taken the place of the old-fashioned legwork that used to be involved in going to library, hauling out books and comparing their content or searching through microfiche for factual references in newspapers. I know I’m dating myself and I am not a Luddite “anti-internet” gal by any means. It’s pretty darn convenient. Just don’t forget that the old principles: research, accuracy, credibility, source citing….still apply!

As Owner and Principal partner of “Writing Right For You” Sheralyn is a Communications Strategist – working together with entrepreneurs to maximize profit through effective use of the written word. Looking for web content that works, blog articles that engage or communications strategies that help you get noticed?  Contact Sheralyn today. Sheralyn is also the mother of two children now entering the “terrible and terrific teens” and spends her free time volunteering for several non-profit organizations.

Sheralyn Roman B.A., B.Ed.

Writing Right For You

Communications Strategies that help you GET TO THE POINT!

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MY CLIENTS NEEDS MUST COME BEFORE MY OWN

Amina

Yesterday I was contacted by an investor, who found me on Linkedin and had been reading some of my blog posts. He and his brother were investing in a smaller market about two hours east of Toronto.  This would be their first purchase in this area and it was a multiple bidding situation.

As first time investors they made some errors, which are common, such as putting in the offer before being pre-approved for financing.  Especially in a multiple offer situation you want to make sure that your bid for the property has no conditions of financing.  The only condition you want is the inspection.   This way if the seller is presented with all of the offers, they will most likely accept the one with no condition of financing as that is a sure thing vs. somebody who still needs to be assessed for financing and does not really know whether they can afford the property.

This investor had put in the offer, ordered the inspection and was now contacting me for financing – however the clock was ticking.  I  immediately asked for an extenstion as I was not certain that I could fulfill financing in such a short time (3 days left).

He went back to the realtor and asked for the extension but it was denied simply because it was a multiple offer situation. The realtor suggested her broker, who lived and worked in that market and could get the appraisal the next day – which would ultimately save the client time and possibly losing the deal.

It was great that they were both organized and could get me the paperwork but I still had to find the lender, who would do the deal.  To further complicate things, the investors were incorporated, which would mean further validation of income.

He kindly called me and said he would stick with me if I could do the deal.  Now, if I was looking out for my own interests, I would have said,  “Yes of course I can do the deal”.  Instead, I was looking out for what is best for my client and suggested he use the other broker with the connections in the marketplace.  If I could not get the deal done, I would not only lose the trust of this client but more importantly I would not be putting my clients needs before my own!

It is hard to give away business but I believe strongly in Karma – what goes around comes around.  The client thanked me for looking out for his interests and said that he would be using me for the next deal.

I believe that if we all focus on putting our clients needs before our own in every situation, it will come to serve us all well.

To your Wealth!

Amina

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How Do You Raise Finance for your Business?

yvonne

You have done the required research, and written the business plan, now how do raise the funds required to kick-off your business? Assuming you carried an initial research, you should have identified some potential sources of finances. If not, you can do this research easily on the internet by using the right keywords, checking what banks have to offer, and visiting your local business centres and libraries.

Also, while writing your business plan, you should have determined how much you need and what you need the money for, this will be important information when approaching potential sources. When raising finance from external sources, it is often helpful to show that you have personally raised or invested some money towards the business. This shows that you are willing to take a personal risk yourself, making financiers more willing to want to take the risk with you.

Sources of finance can vary, the easiest and most stress-free source is your savings. No one asks you questions, and you are not accountable to anyone but yourself. This is assuming you have saved some money before venturing out to set up your business. If you haven’t, don’t lose hope, there are still other means though not as easy.

A popular source that first comes to the mind of most people first is the bank. Should you choose this line or an external funding organisation, it is imperative that your business plan is sound. Sound, meaning it is well written, clearly defines the business idea, demonstrates potential, and return on investment. Simply put, your business plan is your written sales pitch in convincing an investor to lend you money. More important is having a relationship with the bank, having a guarantor who can stand for you, or assets as collateral. You can either apply for a loan or request an overdraft. Ensure you compare the interest rates and repayment terms offered by the various banks. Should you to consider borrowing money against your home, seriously consider this option and weigh the odds, as this could be risky.

You also have the Private Investors and Venture Capitalists. This is where things get more intricate and not as straightforward as getting a loan from the banks. However, Private Investors are willing to invest in more risky ventures but most times in return for shares in your company.

Venture capital funds are funds put up by investment trusts, pension funds, banks, insurance companies, private individuals and industrial corporations. These funds look to invest in companies that can reach significant profits in order to regain their money.

A popular source of finance these days is ‘Crowdsourcing’. This allows you to raise money from the public and interested for your business idea, and usually on the internet platform. In return, you are often required to give something back such a percentage stake in your company or profits. For more information, search the word crowdsourcing on the internet, and you will also fin websites who offer these services.

Another source of finance is family and friends who believe in the business concept and are willing to invest or lend to you the money with or without interest. An option also worth considering is ‘lay-by’ where a group of people come together to contribute money monthly, and the monthly lump sum is taken by an agreed contributor in turns.

Consider soliciting professional help when looking to raise large amounts of funds for your business. All in all, before investing funds into the business, ensure you are working with a financial forecast and plan you should have written as part of your business plan.

Yvonne is a High Performance Consultant, Coach and Speaker focused on working with Individuals, Entrepreneurs and Organisations to execute and achieve their goals.   She can be reached at:  www.facebook.com/oliveblueinc,www.twitter.com/oliveblueinc